C.Srikumar, General Secretary of All India Defence Employees examines corporatization of the defence sector
This may be characterised as a rant or a cry in the wilderness. But insiders are
privy to the fact that Policy making in Ministry of Defence, specifically in
Defence Production is nothing but a cacophony of the ignorant. Out of tune
with reality and run by “guests” from the States with no domain knowledge in
Defence. The Department itself has no institutional memory.
The Government makes endless noises about self reliancein Defence.
There is a great deal of criticism against the PSUs and Ordnance
Factory Board for slowing down the process of developing new & technologically
cutting edge weapon systems, which, arguably, the private sector is capable of.
Several retired Generals (ostensibly some of them consultants and some even
on the pay roll of private sector conglomerates) have let lose a tirade against the
OFB and PSUs for cornering orders on nomination basis and debilitating the
progress of Private sector in this all-important domain. Private participation in
Defence is touted as the magic pill for an end to the various ills that plague
Indian Defence production.
The Defence Procurement Procedure (for capital acquisition, now re-
named as the Defence Acquisition Procedure) and the Defence Procurement
Manual (for revenue procurement) lays down the procedure for various
procurement/acquisition programmes of the Government . By nature Defence
acquisition is opaque, since multiple factors. India is one of the rare countries
which have laid down a detailed procedure in public domain for the purpose.
Past scandals have led the Bureaucrats in MoD to be risk averse and adhere to
the laid down letter of law so that posterity shall not judge them harshly.
Eventually, the procedure places great emphasis on the process and not the final
outcome. Several past recommendations to streamline the entire process by
setting up a specialist organisation have not found support from the
Government. The word specialists / experts are anathema to the entrenched
bureaucracy since it would promptly drive the elite Generalist Bureaucracy out of
The induction of private sector into the Defence industry has, in theory,
taken place almost 20 years ago with liberal licensing processes. However, the
growth of private sector in the Defence technology has not been a success story
as it has been in software, automobiles and other areas, where Indian
companies compete with the best in the world. What ails the system? Is it the
existence of public sector behemoths that impede progress? How do they
prevent the growth of private sector?
The MoD and Defence Production in particular, is a specialist domain. But
the staffing pattern at the senior levels of bureaucracy almost entirely consists of
IAS Officers who have cut their teeth in municipal administration, revenue
collection, urban management, sanitation, law & order and what have you......
except Defence! There is no chance of exposure to Defence in the states.
Strangely enough, we think that the Elite of the bureaucracy are eminently
suited to run the Defence affairs of the country.
What is more..... before they develop any domain knowledge or institutional memory
to equip themselves to run the Defence Ministry better, they are promptly
transferred to unrelated fieldslike textiles, Rajbhasha, coal or other ministries;
or even better, sent to their home cadres where they get back to the subjects
they are more familiar with.
Except for the Navy, which has a system of gradually developing
indigenous capabilities in Defence production/acquisition, the other two services
lack in-house expertise on technological issues. They seem to turn their ire
against the PSU/OFB eco-system with very little knowledge of what is required
to develop indigenous capabilities. The third pillar consists of the R&D set up
which is another much castigated organisation. The products developed by them
have little acceptability in the Armed Forces. Incremental progress is not
something that services believe in. While we insist on high capability systems
from PSUs/ OFB/DRDO, such insistence doesn’t work with foreign suppliers.
We have to make do with what they have to offer. If a progressive approach is taken
to development of systems indigenously, build the supply chain and refurbish
industry with regular orders, we would be in a better situation today. The last
order for 124 Arjun tanks was delivered almost a decade back. The production
lines are idle while the Army has been contemplating repeat orders seeking
changed specifications. Meanwhile the supply chain, spare support etc have
dried up. This is an example of how things ought not to be done.
The curious case of OFB : One of the most criticised organisation is the
219 year old behemoth OFB. While other organisations are set up as PSUs with
limited autonomy, OFB continues to exist as a subordinate wing of the MoD. The
recent brouhaha over the corporatisation of OFB has its’ origins in some
committees which recommended it. But the very first Rajadhyaksha Committee
Report which recommended large level of autonomy (including Finance/quality
etc) was implemented in limited manner. The DGQA and IDAS continue to be
responsible for Quality and Finance/ Accounts. The OFB Organisation has played
an important role in the wars fought by the country. The workmen of OFB have
risen to the occasion to give record production during the Kargil war when the
Government found it difficult to order items for immediate supply. But in recent
years, the MoD has displayed nothing but callous disregard for the Ordnance
On the personnel front; the organisation has not been able to do regular
cadre reviews at various levels leading to a perception that it is the least sought
department from the employment point of view. Recruitment rules which are
urgently required to be notified after each pay commission re-structuring
remains unattended for as long as 20 years, leading to court cases and all round
disgruntlement. Investment proposals remain caught in red tape. Although large
degree of decentralisation of purchase decision making has been done in recent
years, the posting of Heads of Units (GMs of various factories) are still controlled
by the MoD. (A practice started in 2009 as a result of corruption allegations
against the head of the organisation-prior to that, all postings except that of
Members and Chairman of OFB were done by the OFB itself without reference to
If decisions cannot be taken on even non-technical subjects such as
personnel issues / employees related grievances pertaining to the OFB
organisation, can the MoD Officers take a call on myriad technology subjects
that characterise the Department of Defence Production? The last two years
have seen three Joint Secretaries who have held charge of Ordnance Factories,
not to mention two Additional Secretaries and three Secretaries who have
adorned the posts. With no continuity, can there be a long term plan for the
Organisation? Is it feasible for any Organisation to push through any papers
through such a rapidly changing bureaucracy, which comes with ZERO domain
Ultimately this band of Babus in revolving chairs has been given a
mandate to turn the Ordnance Factory Organisation into a PSU. What would
change if the department turns into a PSU. Firstly the Babus in MoD would have
converted OFB into another low hanging fruit like other PSUs. Attend Board
meetings once a month, be pampered by the PSU and have a cushy existence
without the rigour of every file, including individual disciplinary cases and
appeals, being processed by them. It gives them a sense of control, all power
and very little responsibility.
Presently, the OFB runs factories with multiple technologies. It has
created a group of Defence Technocrats and highly competitive workforce in the
Defence Sector. Sadly enough, in recent years, the oversight mechanism
consisting of MoD, Defence Accounts Department, Finance etc. seem to have
gained primacy in the running of the Department. It is nothing but a classic case
of the tail wagging the Dog. Would it become any better if turned into a PSU?
The answer is a resounding NO. There needs to be deep, structural reforms to
the MoD itself, failing which Atmanirbhar will remain a pipe dream. The Trade
Unions of the Ordnance Factory Employees have posed a challenge before the
Government that instead of ruining the “War Reserve” Ordnance Factories
through corporatization route, the Government should appoint an Expert
Committee to achieve the goal of Rs. 30,000 crore target in the next 5 years in
the Government setup itself and also to ensure that the Ordnance Factories
become a world class master for designing and producing modern Defence
Equipments required for the Armed Forces. The Government is not prepared to
listen to these suggestions since the suggestions are given by the Trade Unions
and not by the Private Corporates. Therefore, the MoD achieving “Atmanirbhar”
in Defence Production is a million dollar question.
The Author of this Article is General Secretary of All India Defence Employees
Federation (AIDEF) and the National Executive Committee Member of the
pioneer Central Trade Union AITUC.